'An India Shining quarter for Wipro'

INTERVIEW/VIVEK PAUL

Wipro has produced turnaround results for the third quarter ended December 2004. Vivek Paul, vice chairman and head of Wipro Technologies, the global IT business of the company, spoke to Business Standard. Excerpts:

What are the elements of this tremendous change in results, between the second and the third quarter?

This was the second quarter of sequential 13 per cent growth in revenues. So it indicated a more sustainable acceleration.

Second, last quarter we had said that after six quarters of margin decline we were able to increase margins by a few decimal points. This quarter we were able to increase margins by a whole point and plus.

Like the last quarter, in this quarter it has been buoyant revenue across the board. At the Wipro level, this was an India Shining quarter.

We had both the India export business and India domestic businesses doing very well - consumer care and information technology businesses did very well.

On the global IT export side, we saw broad growth "" 13 per cent sequential quarter growth in the technology business, 10 per cent sequential growth in the IT business, almost 30 per cent sequential growth in the BPO business.

Telecom, one of the sectors about which we had concerns from time to time, grew 15 per cent on a quarter-on-quarter basis.

Is this a reflection of US economic revival?

It is a combination of three factors. First, customers are willing to spend more. Second, given the range of end to end services we have, Wipro is a very attractive vendor from their perspective. Third, if you look at the penetration curve of offshoring, we are now at the late adopter mode.

The late adopters come big and want people who are very experienced and have the scale. As a result, Wipro again stands to gain.

Another way to characterize the growth is that it is coming from the top 50 accounts. They grew at a 17 per cent clip, against the 13 per cent clip as a company. The big are getting bigger.

How do you explain the margin performance, a 1 per cent rise in the last quarter after a 6 per cent fall on a year on year basis.

There were three factors behind the fall. One was foreign exchange rates. As the rupee appreciated, it shrank our margins. The second was pricing. It was under pressure and prices were coming down.

The third was acquisition related costs. Today, much of the acquisition related costs are behind us. Pricing has stabilized. So two factors have levelled out. The third factor, rupee appreciation, we expect to see continue to happen.

So over the last couple of quarters, we put enough oomph into the productivity drive, to be able to offset the rupee appreciation.

We had announced in the previous quarter that we would pass a salary increase in the third quarter that would hit our margins by 1.3 per cent. So we were able to absorb that and still deliver upsides.

How has the productivity growth been achieved?

It has come from better performance in fixed price projects, from better utilization which went up the quarter before and has come down a little in the last quarter, from using fewer sub-contractors, from being able to better manage provision for doubtful debts by collecting more.

We write off amounts as soon as they have not been collected for over 180 days. But most of these outstandings are because large customers are slow to pay.

We did an enormous collection drive over the last quarter, so the normally positive provision for doubtful debts has become negative.

As we look forward, the productivity tools we still have available are utilization, pricing stabilization, and the ability to manage the acquisition costs even better.

How sustainable are the good results?

That only time can tell. But the fundamentals are behind us and continue to be working in our favour.

On the demand side, we continue to see customers spend more, wider acceptance of the offshore model, preference for larger companies like Wipro, preference for the end to end model.

On the supply side, we said two quarters ago that talent was getting scarce, now it is getting easier. The attrition rate is high but at a junior level. So it is not affecting the fundamental ability of the business to deliver.

Lastly, how does it feel to be chosen by BusinessWeek as one of the best global managers? Does it make your work any easier or tougher?

It does nothing to my work which is driven by self-motivation. I appreciate the accolades but I never forget that ultimately I am a representative of 27,000 Wiproites who work very hard every day to make this company successful.

Also, to me the source of pride was that we had an Indian company in that league - Yahoo, Apple - for the first time without any clarification, modification. I think that was very heartening.